There is wide consensus that the rental sector faces a more benign environment than sales, for the time being at least, largely due to lack of stock. Savills finds that high demand and stock shortages have pushed up prime rentals in London and its commuter belt by 10.3% and 5.1% respectively so far in 2022. Further, a modest level of new stock has been outweighed by tenant demand. In London an average of nine people were chasing each property. Into August, availability remained 33% below 2019 levels.
LonRes found rents rising rapidly across all property types in Prime London, with studio flats showing the fastest growth at 26% in the past year, although this has not recovered all of the ground lost in 2021. In contrast, larger properties (3+ bed flats) have shown the strongest growth since 2019 at 23.2%. Houses have been slowest over the past 12 months at 11.5%, with growth since 2019 at 14.5%. So, despite summer being the traditional lull period, Prime London has held up well, although LonRes acknowledge challenges.
Consequently, Knight Frank revised up its Prime Central London rental forecast, with 2022 ending on 15% rises and a further 6% in 2023 (See Table). New landlords may be more cautious due to higher mortgage costs. However, Knight Frank thinks more ‘accidental landlords’ (property owners deciding to let rather than sell for below asking price) may return to the rental market. This should help balance the market.
The critical question Knight Frank identifies is quite reasonable and stark: will uncertainty create more landlords or more tenants? On the one hand, more stock is likely to arrive as sales fall through, while frustrated buyers may become tenants if they expect prices fail to recover quickly.
Knight Frank 5 year rental market forecast
2022 | 2023 | 2024 | 2025 | 2026 | |
---|---|---|---|---|---|
UK | 5.0% | 4.0% | 4.0% | 3.0% | 3.0% |
Greater London | 7.0% | 5.0% | 3.0% | 3.0% | 3.0% |
PCL | 15.0% | 6.0% | 3.5% | 3.0% | 3.0% |
POL | 12.0% | 6.0% | 3.5% | 3.0% | 3.0% |
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